FOMC pregame: SPX setup

Just a quick note on the equity market’s behaviour heading into the FOMC meeting this afternoon, at which the Fed is expected to announce a taper of QE.

Longer-term $SPY fractals still show a primary rising wedge pattern with trendline resistance >$175 (+2.5% from intraday levels). In SPY’s daily stochastic and MFI, you can also see important bull reversals out of those cumbersome 2x bear divergences I’ve continually monitored. The MFI’s breakout, in particular, is a signal I’ve expected and awaited since this summer. In time, MACD should join that brigade, adding momentum to this rally:

SPY daily/weekly/monthly

In terms of the very short term (heading into the FOMC announcement), intraday fractals exhibit a very cautious setup. 1-minute and 30-minute charts show a fulcrum top approaching right shoulder support ~$170.4-170.6 today, beneath the yoke of 2x bear divergence. The 1min is already showing early signs of a bottoming process, with 1x bull divergence bubbling. At least preliminarily, that signal is indicative of a classic rally up to neckline resistance of the fulcrum top at $171.15:

SPY daily/30min/1min

I’ll have to reassess the landscape when we reach that crossroads, because the reaction thenceforth will govern the coming weeks’ performance. In the interim, this fulcrum top should classically recede from that next test of its neckline, but [again] I’m rather biased toward longer-term fractals right now, which recommend an intermediate term SPY rally >$175 (+2.5%)–trendline resistance of the primary pattern, a rising wedge, that’s ultimately a bearish construction for the long term. In sum, I’m focusing on the more reliable longer-term signals, which [in this case, the intermediate term] are bullish.

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We’ve added more to Japan ($DXJ) already this morning. We’re trimming our Ford ($F) position, as planned, and we’ll likely use additional cash to add to our Russell 3000 Index ($IWV) exposure if SPY reaches down to that $170.4-.6 right shoulder support intraday.